funny? >> they're going to be there too? >> they are a party group. >> enjoy your valentine's day. have a wonderful time. we'll see you tomorrow for try day friday. from beautiful santa monica place right here at >> i'm jim cramer and welcome to my world. you need to get in the game. firms are going to go out of business and he's nuts! they're nuts! they know nothing! >> i like to say there's a bull market somewhere. >> "mad money," you can't afford to miss it. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm trying to save you some money. my job is not just entertain you but i'm trying to coach yod teach you. in recent years, stocks have become more hated, hated than any time i can remember in my entire career. that spans a lot of time. i still believe anyone can turn a profit in the stock market as long as you're willing to put in the time and the effort to keep track of what you own. i wouldn't come out here every night and try to educate you if
i didn't think it was possible but actually feasible for the vast majority of people to succeed at managing their own money. okay. so if that's the case, then why is investing so darn difficult? how come so many people struggle to make money in the stock market? how the heck can i believe it's possible for you to beat the averages, the big benchmarks like the s&p 500 and the dow jones industrial average and so many fund managers fail to do so? simple -- you can do it but you have to do it the right way. one of the biggest obstacles to successful investing is a lack of clarity about what investing is supposed to mean. i've seen countless people try to follow the conventional wisdom about money management, only to have their investments wiped out because the conventional wisdom is wrong. and the worst part is those people had no idea they were making a mistake.
they actually thought they were being responsible. tonight i want to demystify long term investing. we're about long term investing. people let the concept get in the way of investing. if you think it's about making boatloads of money, i can teach you. there's a darker side. i've seen it used as an excuse for poor performance or for not paying attention. it's okay to take the pain. losing money isn't a recipe for if you think it's about making boatloads of money, i can teach you. there's a darker side. i've seen it used as an excuse for poor performance or for not paying attention. it's okay to take the pain.
losing money isn't a recipe for making money. losses don't turn into gains if you wait long enough. long term is the excuse, and that thinking will make you a worse investor. being a good investors with the idiotic ideology of buy and hold or as i skeptically dub it buy and forget. rocks? first and most important, long term investing is not the same
first and most important, long term investing is not the same as simply owning stocks for a long team. in other words, don't confuse being a good investors with the idiotic ideology of buy and hold the notion of being in something for the long term doesn't justify owning damaged goods. the stocks of companies in bad shape and the misguided hook that they'll recover, damaged goods. the idea of buy and hold is once you purchase your stocks, you just wait. me, i never liked waiting. and it also happens to be a terrible strategy. i'm constantly saying you have to keep track of your
investments. do that ridiculous, i know, hard it isn't ridiculous and not that hard and time consuming. the quarterly reports, read the sec filings, read the transcripts a little faster sometimes. much of the research that used to be available only in the paying millions of commissions now found on the web like a yahoo finance guy, cnbc.com, they all got it. it's your money. please invest time in it. the advocates of buy and hold act like investing for the long term means you have a license not to pay attention to the short term. it's like you have a birthright. i buy a stock and that allows me to not do home work. but you always have to pay attention. the moment you stop is the moment you start losing money. you'll never be able to recover from the losses until you get engaged with your portfolio again. you're not stupid. you can get engaged and you can do this. now sometimes companies go into what is known as secular decline and stocks never really recover. in that case, you can't afford to wait for a turn around. you have to get out before the
damage becomes too horrific. yes, polaroid, kodak, okay? research in motion. nokia. radio shack, right? radio shack that was a good one. or super value all the way down we were told that long term you're fine. or in other words, be a long term investor doesn't give you a license to be lazy and apathetic investor. anyone -- anyone who owns stocks through the misery and horror of the crash in 2008 and beginning of 2009 knows it doesn't work. investing for the long term does not mean owning stocks for ever no matter the cost. you can just buy and hold stocks for eternity. and they will magically bank of america comes back to $50. as long as you don't pay too much attention, i get it. from the stories i read and pundits, lessons are being forgotten. i can't have that happen. i'm one of the loudest opponents of buy and hold. in this brave world of flash crashes, many people who foolishly espouse this philosophy tried to change their
tune or been discredited and no one listens to them anymore. it doesn't mean you should write off the idea of long term investing, too. it doesn't mean stocks can't make you money over an extended period of time although that's what many of you think if you confuse long term investing with buy and hold. buy and hold was always bogus. the truth is stocks are the best way to make money for retirement, 529 plan to send your kids to college or just build up savings so you can afford a big ticket items, especially they allow you to compound your wealth by reinvesting, the dividend pairs, that's good investing. that said, you'll never get any of those things if you use the concept of long term horizon as an excuse or alibi for bad performance and holding stocks that can't even afford to pay the debts or dividends. sometimes you won't even know about them if you just buy and forget. you feel it's a license not to have to find out about it. here's the bottom line. long term investing is mixed up over the years. it doesn't mean it's impossible or not worth trying.
i can teach you the disciplines and strategies that allow you to build long term wealth as long as you remember to say hey, come on, i'm a long term investor is no excuse for not doing the homework or following the rules. if anything, be in stocks for the long term requires more diligence and more patience than if you're in there for the short term. don't throw away all the lessons i teach you. you're going to need them. to paraphrase that poetic amateur investor and world renowned beauty gertrude stein, a loss is a loss is a loss unrealized or otherwise. don't you forget it. bill in florida. bill? >> caller: yes, jim. nice to talk to you. jim, i'm a retiree. i have a fixed income. i'm very concerned about the future. there is so much uncertainty, jim. there is uncertainty in taxes and inflation is a big concern of mine. is there anything i can do to protect myself? >> look, i got to tell you unless you have -- you're a
person who really does have to heed my 20% in the gld and 20% in gold. that is going to be the best defense. i think the defense is right to have. i'm not going to go tell you, listen, buy bonds that yield 2% and that's good protection. i think gold is going to be the best defense you have against the worries that you just outlined. let's go to anthony in virginia. >> caller: washington redskins boo-yah. >> when it's overbought, my own rule, i use the s & p oscillator that comes delivered to me on my door on saturdays, we are plus five if we're very overbought, take a pass. another time will come. however, you can get started small and hope it comes back if you just can't resist. sam in ohio, sam?
>> caller: hey, jim. >> loving it, what's up? >> caller: i got a question. i've been looking at a couple utility stocks and looking at going with preferred instead of the common shares. i just want to get your opinion on maybe what might be better. >> come on, man. we want upside. we don't want to cap our upside. a lot of these utilities should have fabulous growth stocks, particularly in a growth economy. you know what? own them outright. we'll do just fine. of course i want you in this market for the long run. the whole idea of trading back -- you can't be just high frequency traders, give me a break. long term investing but that doesn't mean buy and forget, even when you intend to hold on to a stock for the long haul, do not throw out the rules. keep doing the home work. be sure that you're in the right merchandise and stay with cramer. aspirin, really?
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let's talk the price is right. not the game show. i'm talking about the stocks. do you want to actually make money from your stocks? it's critical you buy them at the right price. that's true whether you make short term trade or purchasing something that if everything goes right you expect to hold for years and years and years. the price matters. when you pay too much for a stock, you make it difficult to rack up the gains we want. you can have fantastic idea. if you get the price wrong, you may not make any money. i think price is dramatically underrated as a determinant of
successful investing, which is why tonight i'm giving the power of price its due. how do you find the best price to pull the trigger given how important i think it is? when you're investing for the long haul, you have one huge advantage over people using a shorter term horizon. a resource that traders simply don't have the luxury of exploiting. i'm talking about time. as a longer term investor, you have all the time in the world. now when you want to buy a stock that you like because you like the underlying company's prospects and when there are no near term catalysts that can drive the share price up soon, that is a recipe for being patient. you don't have to pay the price the market is giving you right at that very moment, right? you can be patient and wait for the stock to come down to your price before you do this. of course, you're never going to get an all clear signal telling you it's time to buy. you're not going to hear this and then say i know. how exactly are you supposed to know how long you should wait before you pull that trigger? simple -- don't know. there is one of the areas you have to embrace the facts of
ignorance. that's why i tell you to buy the stock in increments. loading up gently and over time. we're all ignorant in the end. we don't know when a stock or market is going to give us the ideal time. let's bet we get the wrong one at first. if you buy them all and the stock goes down further, what is going to happen? you'll feel like an idiot for losing money so quickly. then you'll dump the whole position a point or two down instead of using weakness to buy more. i studied thousands of trades. in short, there is no right price, but if you build up patiently, you can avoid paying the wrong price. and that's more important. that's why back in the old hedge fund, and you can follow along, i play with an open hand, not a lady gaga style poker face, i like to buy with wide scales on the way down. i know authentic wall street gibberish. let me translate into american english. buying with wide scales on the way down describes the way you should purchase a declining stock or stock you're afraid is going to go down because the stock market in general while it
approaches a bottom. you want to get the right entry point for the long term investment. this is the way to do it without getting discouraged. i'm trying to stop human nature here. it's impossible to call a perfect bottom in an individual stock. that's why we don't try to time the bottom. instead, the smart move, the way the pros do it and the way you should do it is buy incrementally on the way down. the big guys do this, believe me. it's your insurance against the potential bad judgment of thinking you know the stock's really done going down and you want to be all in because you're so cocksure, so darn sure that you're getting in on the ground floor. in this game, you got to presume there is a basement if not several subbasements, okay? this notion of scaling into a position is a trick that helps you get around the difficulty of timing the market. it is a trick. it is just something that i've used over time. all right. so let's say you want to buy 400 shares of caterpillar. know what? you're going to feel like a stooge.
the dreaded shemp. and worse, you would have lost $2,000, blink of an eye. that's why we don't do that. 400 shares of caterpillar, start small. buy 100 shares. then wait for a pullback. wait for the market to bring it down. then if cat comes down to $85, rather than contemplating suicide, you can buy more shares. you buy the next 100 shares. if it drops to $81 and put in the final $100, if it sinks below $80, you got a good basis, basis matters. basis is price. the worst case scenario, caterpillar goes higher after $100 and you make money. now that's what i call a high quality problem. similarly, you should unload it incrementally. that way you don't have any regrets. oh, boy i sold it all and then it had a big move. now let's talk about scales. if you're buying a stock that is sinking lower every day, that's
okay because the company can be good. can you either buy it with strict scales or wide scales. what is the difference? let's stick with caterpillar. strict sales, you buy 1,000 shares. each time they go lower, you buy more. strict scales you buy in the same increments. every time cat goes down a point or three points or whatever size decline makes sense, you purchase the same amount of stock. using strict scales is smart and responsible. that's why i like to use wide scales when buying a stock. particularly a volatile stock like caterpillar. you buy larger and larger positions as the stock goes lower. i used to think of it as a pyramid of buying. if a stock lost a point, i would put on 1,000 shares. another point, 1500. and when you go so low can you hardly believe how poor the stock is trading, double down. do you see what i mean? it's about a pyramid structure of buying. the best investors i have all seen use a pyramid style. the great thing about wide
scales is they leave with you lots of room to maneuver. when the stock eventually bottoms out, you're going to want to pour your money in using wide scales allows you to use the greatest number of shares at the lowest price. the best thing is you can afford to be patient. when you like a company's fundamentals, wait for a pullback or sector wide selloff to accumulate a big position in that company's stock as it goes down. make sure the story is still intact. do the homework. if the company is broken, then the stock is never going to be a bargain no matter how low it falls. in that case, you might need to abandon ship and find a better one to travel on. there is no sin in recognizing you made a mistake and you have the wrong stock. the bottom line, in this game, few things are more important than price. trying to get a good basis. long term investor, you have the luxury of being able to wait for a good one. be patient. keep your bat on your shoulder, wait for the right pitch. and when you're trying to catch a stock on the way down, buy it with wider scales to get the best possible overall basis. joe in massachusetts.
joe? >> caller: hey, boo-yah, jim. i have a quick question for you on stop loss orders versus stop limits and how an individual investor can best use that, not only to minimize losses but to ride the ups and downs of an individual stock. >> right. well, look, i don't condone these. if you're going to own stocks and you're going to try to get the right prices, you have to stay on top of it. i'm sorry. it's too important. it's your money. you get one of these flash crashes, you bought a stock at $80, it's at $70 immediately, i can't condone that. the market doesn't work well enough to do those things anymore. you have to protect yourself from any market that acts as badly and strangely because of high frequency trading, the old tricks out the window. price matters. basis matters. don't buy all at once. don't sell all at once. keep an open mind. keep doing the homework and stay with cramer. these mr. clean guys, they're like a clean team.
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the only way to generate strong returns is putting effort into the process. you can make money in stocks without keeping track of short term developments in the underlying companies is like a personal trainer who promises can you get in shape without doing any exercise. here's a pill, okay. that's what buy and hold is. it doesn't work. i think the substantial majority of public thinks this buy and hold nonsense is the only way to invest. people are convinced if they buy blue chip stocks and just wait long enough, those stocks will work their way higher. that's some law of reverse gravitation they subscribe to. in recent years -- well, let's say it's been really horrific. think about it. for the last five years the middle 2007 to middle of 2012, s&p 500 declined 9%. things got better over the last few years. but when you look at the benchmark's performance over the last -- over the first decade of
the new millennium, s&p 500 was down 24%. you only lost 9%. then you factor in reinvested dividends. which is why, hey, always own high yielding dividend stocks. even factoring dividends, you were better off hiding your money in a mattress than buying and holding stocks. the strategy didn't work. let me give you some advice that could have spared you a great deal of pain on the subject you almost never hear from any of the fraternal order of buy and hold. i want to talk about a forbidden term, some say it's curse word. marks me as a charlatan. i want to talk about selling. selling. every stock you buy you should consider comes with an expiration date. again, radical. knowing when to sell those stocks, especially winners is every bit as important as knowing when to buy stocks. it's more critical. so many people make such a huge number of selling related mistakes by panicking and selling in weakness or getting greedy and not selling at all.
no one ever talks about selling except me. if you pick the right stocks, get it at the right price and then you're going to have winners that are up and up big. the trick at that point is not to go all in gordon gekko. greed is not good, man. it's dangerous. it's horrible! boo! bulls make money. short sellers are bears can make money. pigs, slaughtered. bacon. when you have a serious winner, even if you think it has many years of gains left in it, you know what? take some profit. period. no discussion. the only time you let the winners ride, you can let some ride, it's a mistake to let them all. you got to ring the register on some, a partial portion or position. otherwise the winners could become losers and that's a huge sin. best to lock in profits while you still have them by selling incrementally into strength. you haven't really won until you have taken something off the table. i'm making a lot of money. don't use that term.
making unless you're profiting. ringing the register. why am i putting so much stress on the need to unload the best performing stocks? well, for starters, you don't need me to tell you to sell the losers. when you are in a stock and the company is letting you down, maybe management isn't executing, maybe the economy took a turn for a worst, it's out of favor, don't get sentimental. don't give them the benefit of the doubt. sell. better to act quickly. first loss, best loss. take a small loss and give a broken company a second chance to burn you and then take a larger loss. most people hang on to the losers because they're waiting for them to get back to even. the worst mistake. they believe buy and hold. but even then, these people know their losers deserve to be sold. they want to sell. they're just waiting too long for an unrealistic price that is too high given the downturn with the actual company. selling your losers makes perfect sense. selling your winners, that is counterintuitive for many of you. you have to trim the biggest
gainers, the first reason is simple. diversification. let's say you bought apple around $200. it was 15% of the portfolio. it's a much larger piece of the pie. even if other stocks you own have gone up a decent amount. you have too much exposure to even the single best stock and too much exposure to whatever sector that stock is in. you never want to have more than 20% of you portfolio in any individual sector. keeping all your eggs in one basket is downright dopey. that's why you need to trim the winners as they go higher so they don't become too large a piece of your portfolio and get you in trouble. i'm not saying sell them all. that is what it's going to be interpreted as, then it's not true. if you're investing for the long term, you have time to do this gradually, pieces. not all at once. as your winners go higher, sell off parts of your position. it's the scale, slowly over time. like i told you earlier, never sell all at once, don't buy at
once, and try to wait for moments of strength. don't wait too long. you don't want the portfolio to become too heavily weighted toward any one group. now there is one more concept you should be aware of when you sell the best performers. the idea of playing with the house's money which i explain in one of my investing rules. when you own a stock that had a huge multiyear run, trim your position to the point where all the money you have invested in that stock comes from profits you already made. not a penny comes from the original investment. once you pare back the winners so you're playing with the house's money, then, then you can you afford to take more risk with what's left. that's the holy grail of investing because you can't lose. you're in a can't lose position. can you ride it all you want. never let it go. that's fine with me. that you can buy and hold. it's bought and paid for by the house's money. one last thing. younger investors can afford to let their gains run for longer than older investors. those of us who are older and closer to retirement simply cannot afford to risk turning big investment gains into losses.
we don't have time. when you're young, it's less important you preserve the capital. you have the whole working life to make up money you lose, all the paychecks coming in. those of us in the older demographic, even if you're extraordinarily well preserved, like myself, who with guess that i'm a limb better 60 something, you have to be more careful. that means trimming winners more aggressively and ringing the register more regularly than a younger investor might. when you invest for the long term, you can't just hold stocks forever. you have to remember to take profits, trim back the winners so that the portfolio stays diversified. when can you, take all your invested capital out and play with the house's money. that is my ultimate goal. that's the only time i say you can buy and hold. nick in kansas. nick? >> caller: hey, jim. i was just wondering should we embrace the increasing popularity of etfs as a way to mitigate market volatility? if so -- which ones would you recommend? >> the only etf i recommend on this show is the gld. why is that?
that's gold. i want to own the best. an etf gives me the opportunity to own the worst with the best. i think one of the things i learned is pick which ones are better or worse. that's what i want you to do, too. i can teach you to do it. daniel in texas. >> caller: jim, big baylor bears boo-yah to you. >> thank you. >> i was in a real money portfolio management class. one of our key tools of trade was the peg ratio to find the most valuable stocks in the fund. i'm specializing in i.t. and started looking more toward the cash flow and the free cash flow to find more valuable i.t. stock. do you think less cash flow -- >> look, i like the peg ratio. i look at myself and analyzing a company i want to be involved in. i look at operating cash flow. that's the one thing that no one can really jigger. operating cash flow is growing to me and you're a student in
business, you know how to look for it, is a great way to measure a company's worth and its future. with apologies to gordon gekko, greed, not good. you have to lock in profits as stocks go up. you can't just hold stocks forever unless you're playing with the house's money. the best position you can be in is when all that's left is the profit that the market's given you. then let it run forever. stay with cramer.
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if you want to invest for the long term and like it or not, that means planning for your retirement. to misquote john maynard keynes, in the long run, we all retire. i know it may not sound sexy, believe me, trying to put together enough money to become financially independent is really what we do every night here on "mad money." i'm sure you heard the basics of retirement planning a bazillion times. you have to contribute to your 401(k) plan and contribute to your ira.
that is the conventional wisdom. so tonight instead of telling you to park money in the ira, i'm going to give you suggestions on what stocks you should buy. first you need to know why everybody always tells you to take advantage of the 401(k). these are tax bus vehicles. the money you put in a 401(k) or ira comes from pretax income. while the money stays in these accounts, you pay no taxes on the profits or capital gains tax, no dividend tax. they can compound for years tax free, giving you larger returns over decades. only pay taxes on the money when you withdraw it. then the tax is regular income. that's a sweet deal. especially if you're worried justly about tax rates or dividends or capital gains going higher. they do fluctuate over time. they've gone up and down throughout my trading career. i want to give you something heretical here. something almost nobody will say. most companies 401(k) plans stink. they got high management fees and administrative costs that
eat into your returns. worst of all, they typically offer you lousy choices for investments, not nearly enough control over them. the 401(k) business, to me, is sometimes a racket for the managers that get to charge these large fees. i'm very upset about this. i'm helpless to stop it. ideally when you manage your own money, you want a diversified portfolio of 5 to 10 individual stocks. most 401(k) plans won't let you do that. they only let you choose from a limited menu from a couple dozen different mutual funds with stock funds and bond funds. the best can you do is find a decent low cost index fund and put your 401(k) money in there. given the whole premise of "mad money" is do better than an index fund by picking individual stocks and managing your portfolio on your own with your own time frame, that makes a 401(k) a pretty poorly designed vehicle. sometimes it feels like the whole 401(k) system was set up to benefit the financial services industry, not you. given the way washington works, it wouldn't surprise me if that was the case.
most 401(k) plans stink. you should still contribute, even if you put it in cash. you have to take advantage of its tax blessed nature. the tax favored vehicles are too good to pass up. many employers match the 401(k) contributions. when you save for retirement, put enough money in the 401(k) to max out the company match. if you have one and then stop. then the rest of the retirement investing should happen in your ira with the upper limit on what you're allowed to contribute in a given year. an ira gives you the freedom to invest your money whatever way you want. for 2012, the maximum contribution is $5,000, $6,000 if you're over 50. what should you buy? like i tell you in getting back even, the best bet here is to own many of the high yielding stocks i talk about all the time on this show. they provide the protection and generate income. the couple of wrinkles that make investing in ira different from investing in a regular account, as much as we like high yielders, it doesn't really work well for master limited
partnerships. think of the pipeline stocks. the reason, mlps are already tax advantage. distributions are considered return of capital. you don't pay any taxes on them until you sell the stock. but there is this arcane tax rule interpreted very toughly by the irs, you buy too many stocks within a retirement account, you give up that tax favored status. paying the irs taxes you wouldn't pay if you bought them in a regular brokerage account. in general, reits can have high yields and therefore really worth owning your ira. you have to be careful of the mortgage reits. what i have to tell you is that the group you want. you have to consult your tax professional about mlps and real estate investment trusts before you choose them for your retirement accounts, otherwise go with plain utilities and higher yielding telcos. beyond that, use the same metrics you apply to any other dividend, high yields, it has to be safe, better than enough earnings to make the payoff. we like a consistent track record of raising dividends.
that is great for capital gains that are tax protected. the best way to prepare for your retirement is putting your money in an ira and then investing in high yielding dividend stocks. reinvest your dividends and let them compound year after year after year without paying any taxes until you withdraw your money at the very end. that's a terrific recipe for producing huge long term returns. david in california? >> caller: hi, jim. like your show. >> thank you. >> caller: you comment about making conference calls. i'm wondering, you're probably at the institutional level. do the ordinary individuals gain access to these conference calls even in the listen only mode? >> a lot of times they'll let you do that. that it doesn't matter. you don't need it in real time. you can always just go get the transcript. that is the way i do it. i mean sometimes i do it real time. a lot of times we do it on the show. do the transcript on the way home. during the transcript at night. it is readily available everywhere.
you stop -- that's the important thing. you can stop and think and you can't do that when you're listening to it live. long term investing involves not only an ira but high yielding stocks, the right ones to put in. reinvest, build up over time, avoid the taxes by simply making sure you make the contributions every year. stick with cramer. and...done. did you just turn your ringer off so no one would interrupt us? oh no, i... just used my geico app to get a tow truck. it's gonna be 30 minutes. oh, so that means that we won't be stuck
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how on earth are you supposed to pick stocks for the long haul when sectors are constantly going in and out of style in the wall street fashion show? how do you buy something to rack up multiyear gains when that is not the way this game is working anymore. there are very few stocks you can keep on riding higher and higher, year after year, but when you find them, they're the holy grail of investing.
and those don't go in and out of vogue to stick with the fashion show analogy. all right. like i told you before, there's no such thing as the stock you can own forever. that's the essence of the kind of buy and hold thinking that lost so many people such huge sums of money over the years. but some winners are more lasting than others. and there is a certain kind of stock that can produce incredible multiyear gains. they can be owned longer than ordinary stocks. i'm talking about what is known as secular growth stocks. that is a rare breed that you should always be on the lookout for. these companies are driven by powerful long term stories that transcend the strength or weakness of the underlying economy. most companies need a healthy economy in order to thrive. we call that cyclical growth. but a true secular growth story can deliver fantastic numbers. the numbers so consistently that they keep powering the stock higher quarter after quarter regardless of the economic
environment. i like to look for big picture themes. we have a much broader trend. take the move toward healthy eating. embrace natural and organic foods. this organic theme made whole foods a power house stock. of course, it also destroyed the regular supermarkets. the same thing goes for hain celestial. it's not the average consumer packaged goods company. however, while these stories can last for years, even secular growth trends in the end have a limited shelf life. you see these themes age, is that there are fewer and fewer plays had a can consistently make you money, but they never last forever. when the smart phone was a recent invention, i started talking about the power of the mobile internet tsunami. and for a while, boy, there was a ton of money to be made over the smart phone food chain as people converted from dumb phone to smart phone.
but really the tsunami turned out to be the reason to buy the best of breed players like apple. it turned out not to be a license to buy even the weakest players which fell by the way side as we learned, a rising tide does not lift all ships. the ones with holes in them still sink even with great secular trends. here's the bottom line. most of the time you can just hang on to a stock for years and years. but if you find a secular growth story, something that is driven by the same kind of theme that is pushing up a whole foods or apple, then there is nothing wrong with owning the super high quality stocks for as long as the story stays intact. they're not part of the wall street fashion show. it can be a very long time. but just like life, even secular growth stocks don't last forever. and while you may want to go for the greatest secular surf ride of all time, remember, even the biggest wave ends up crashing on the shore. only homework will keep you from crashing along with it. larry in tennessee please, larry? >> caller: is this jim cramer? >> yes, it is james j. cramer. how are you? >> caller: great, man. i think i've read everything you
wrote since 1998. thank you for helping me put my daughter through college and teaching us old gamers how to survive this stuff. >> you're terrific. thank you so much. thank you. >> caller: i have a question. tax season is coming up. you teach us to trade around the core positions up and down. i wonder if you have any advice for us coping with wash sales. >> that's a problem. what i'm going to do on that question is i'm going to tell people, because i can't give individual tax advice, you have to speak to your tax consultant about when you can take these sales and then go back and buy. you're absolutely right. there can be a wash sale problem. i don't want to speak broadly about it. that is something that is individual to a person's tax consultant. no stock is forever. they come in and out of fashion all the time. but some do last longer than others. those are the secular growth stories we live for. they have a longer shelf life and that's ultimately what we're
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all night i've been trying to walk you through what it does and doesn't mean to be a good long term investor. while we're on the subject, i have a last point to make. there is nothing virtuous about long term investing. don't get too hung up on the nomenclature. the notion of trading is loaded with negativity, it is a flip in and out of stocks for short term gains. all right. i'm not making any judgments. we're here to make money. i happen to think picking long term winners is more lucrative than trying to game short term stock moves. it's an easier strategy for you to duplicate at home. i like it. if you find that the portfolio does better when you manage the money more actively, hey, more power to you. i'm not going to judge you. although never forget you do not have the horses to compete with the high frequency bandits or hedge funds with multimillion dollar research budgets to support the trading operations.
at the end of the day when you go to the bank, they don't care if the money was made in short term trades or not. we've seen banks launder drug money from mexican cartels. we've seen them take money from iran. they're not going to draw the line at money you made from trading stocks. the teller, presuming can you find a unit is not going to say i can't accept this deposit, that is dirty money from trading. take it elsewhere. money is money. here are the buy and hold talk, the only money that comes from stayed investing. the only thing that is different between trading and investing is time. investments you plan to be in a year or year and a half. day trading is totally different. i can't encourage day trading. you don't have to choose between passively sitting on your holdings as an investor, even when you think you should be taking action or flitting in and out of the holdings on a daily basis as a trader. look, do what you need to do to save money.
find your own happy medium. no matter which path you choose or both, just be true to your disciplines. do your homework. stay on top of things. i think you'll do better than just about any mutual fund, etf or hedge fund you could have at your disposal. only those trying to manage your money for themselves, in other words, take your money and their minions, they're the only ones that would disagree with the statement that says can you do it better yourself. stick with cramer. >> let's go to kentucky! >> how about a hillbilly boo-yah! >> a hillbilly boo-yah! holy cow. >> here is a big las vegas ching, ching, ching boo-yah! >> a big staten island, new york, forget about it. boo-yah! >> boston, mass. >> michigan. >> california. >> georgia. >> alaska. honolulu. >> boo-yahs come from all over america. let cramer channel yours. what did i do with my last fii was a dietician.....
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